By Nevena Krasteva
The Black Sea Trade and Development Bank (BSTDB) is an international financial institution established by Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey, and Ukraine. Its headquarters are in Thessaloniki, in Greece. BSTDB supports economic development and regional cooperation by providing loans, credit lines, equity and guarantees for projects and trade financing in the public and private sectors in its member countries. The bank’s authorised capital is 3.45 billion euro. BSTDB is rated long-term “A-” by Standard and Poor’s and “A2” by Moody’s.
What major challenges do you see facing the economies in Southeast Europe (SEE) and the private sector in particular? What steps can governments they take to improve the overall business climate and unlock the region’s growth potential?
The Black Sea region is very diverse. The countries have different levels of economic development, they are often at different stages of the business cycle, have different degrees of openness to international exchanges, and have different economic structures. Varying levels of integration in the world economy, internal and external policy challenges often result in increased vulnerability to external shocks.
On the positive side, countries in the region, with few exceptions, have consolidated economic performance through prudent fiscal management, macroeconomic and structural reforms. To some extent the countries’ differences present cross-country complementarities with significant benefits from increased regional economic cooperation.
What is BSTDB’s response to these challenges?
BSTDB is ready to support the economies of its eleven member countries through focused provision of financial assistance to export-oriented corporate clients, small and medium enterprises, trade finance, and investment in the public sector.
What are the highlights of BSTDB’s next four-year strategy? What main goals does it set? Does it envisage any major shift in focus?
The bank’s strategy aims at achieving higher development impact and increased regional cooperation through the bank’s operations and investment across the Black Sea region. The four-year strategy envisages increased sectoral diversification and introduction of innovative and more flexible financial products with increased focus on projects involving two or more countries. In the period ahead, the bank will make an effort to achieve an annual portfolio growth with an emphasis on quality.
The bank’s other strategic objectives include further strengthening of the credit rating of the institution. Over the period 2010-2014, BSTDB was upgraded twice by Moody’s, to A2 long-term. The bank will try to achieve a further improvement in the risk rating over the next four-year period.
Operationally, BSTDB will target an increased share of public and quasi-public sector operations, including municipal financing and PPP projects.
Importantly, BSTDB will continue emphasizing support for small shareholding countries – Albania, Armenia, Azerbaijan, Georgia, and Moldova. This dynamic group of countries has a combined share of 9.0% in the bank’s capital, and a portfolio share at about 20%. In parallel, the bank will expand the use of technical assistance for project preparation in member countries through the established special funds and continue providing advisory support to partner institutions in member countries. Earlier this year, BSTDB provided advisory support to the Bulgarian Development Bank in launching trade finance operations.
What is the total volume of BSTDB’s planned funding commitments in SEE for the next four-year period?
With the support of directors and guidance from the board of governors, the management of the bank is now engaged in a strategic planning effort to be followed by visits to member states for identification of government priorities and business opportunities. The bank’s management will provide the governors with proposals for future operations, including ambitious lending volume targets.
Which are the key areas of BSTDB’s operations? Do you plan to step up support for certain industries? In what sectors do you expect to see a pick-up of overall investment activity?
The bank focuses on providing financing in activities with high development impact, generating growth and employment across member countries. The BSTDB strategy puts an emphasis on operations promoting physical and social infrastructure, trade facilitation, municipal services and public utilities, environmental protection, power generation, and transport. Financial intermediation through the banking sector in the region will continue to be a significant BSTDB operation-al activity in the years to come.
Would BSTDB consider joining any of the big cross-border energy projects in the region?
Absolutely! BSTDB is keen to contribute to energy security in our member states and gives priority to regional and cross-country development projects. Already, the bank is active in the energy sector through provision of financing for renewable energy and energy efficiency projects. Opportunities that may arise in the energy sector will be carefully assessed, and to the extent that they are in line with the bank’s mandate, financial and environmental standards, will definitely be supported by BSTDB.
What are BSTDB’s plans regarding cooperation with international financial institutions (IFIs), donors, and other external actors?
Cooperation and partnership with IFIs and bilateral development institutions active in the Black Sea region is a BSTDB strategic priority and an integral part of the bank’s strategy for increased resource mobilisation for the member countries.
One of the instruments that BSTDB is using to help establish closer business ties with multilateral and bilateral development institutions is “Observer Status with BSTDB”. Ten multilateral and national development institutions are BSTDB Observers, including major IFIs, such as the European Investment Bank, the European Bank for Reconstruction and Development, and the International Finance Corporation, and leading national development assistance institutions, such as Germany’s KfW, the Development Bank of Austria (OeEB), Proparco of France, and others. The observer mechanism envisages regular contacts at the level of senior management and experts to update each other on strategic priorities for common countries of operations, co-financing opportunities, funding options, technical assistance and other matters of common interest. Observer institutions also provide financing to BSTDB to on-lend to clients in the Black Sea region. Over the past three years, BSTDB has signed long-term loans of over 200 million euro with KfW, the Nordic Investment Bank, Proparco, and OeEB. These funds are used for financing projects in renewable energy, municipal infrastructure, small business development across the Black Sea region. Looking forward, BSTDB will further expand this cooperation with existing observers and other development partners for the benefit of the region.
A strategic concept is to leverage the bank’s financing to act as a catalyst for attracting complementary sources of funding for our clients, promoting the region’s investment potential. From this perspective, the bank’s strategy is closely associated with enhanced partnerships with other IFIs and public and private co-financing partners.